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US dollar moving up following Powell's comments

US dollar daily update


US dollar daily update

The US dollar is currently strengthening against all major currencies. Yesterday, the buck moved up sharply after Powell delivered an upbeat assessment of the US economy and mostly sidestepped questions relating to global trade tensions. Looking at US dollar index futures, yesterday's move up was accompanied by slightly higher than usual trading volumes. This is a sign that bulls remain in charge. In yesterday's daily update, we wrote that buyers were likely to emerge as the US dollar index approached the bottom of our indicated trading range. Today's trading range is 94.60 - 95.50. 

Following Powell's comments to the Senate Banking Committee, he is expected to speak to the House Financial Services panel later today. While many expected the Fed Chair to comment on trade tensions, Powell instead suggested that trade policy was not the Fed's responsibility. He did, however, suggest that higher tariffs would have a negative effect on growth. Given the risk of permanently higher tariffs in the future, escalating trade tensions may ultimately weigh on the Fed's current policy of monetary tightening. However, this is not the case today. Looking at Powell's comments on the broader economy, he delivered an upbeat assessment on growth and said that more rate hikes were justified. 

Looking at recent economic data, industrial and manufacturing production figures accelerated relative to previous monthly figures. Most economic indicators from recent history show that the US continues to enjoy accelerating growth and inflation. This is in stark contrast to other major regions (such as Europe and China), and is one of the reasons why the US dollar continues to outperform. Our outlook on the US dollar remains bullish. 

USD/JPY is up slightly and currently trading above 113.0. EUR/USD is down slightly and trading above 1.1630. GBP/USD is down slightly, and currently above 1.3090.

Date Event Actual Previous
July 16 Retail Sales YoY JUN 6.6% 6.5%
July 17 Industrial Production YoY JUN 3.8% 3.2%
July 17 Manufacturing Production YoY JUN 1.9% 1.2%
July 17 Fed Chair Powell Testimony
July 18 Building Permits JUN 1.301M
July 18 Housing Starts JUN 1.35M
July 18 Fed Chair Powell Testimony
July 19 Initial Jobless Claims 14/JUL 214K
July 19 Fed Quarles Speech

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